Measures, Public Private Partnerships and Benchmarking
Edited by Jaap de Koning
Chapter 3: Labour Market Activation Policies: A Comparison of the Use of Tax Credits in Belgium, the UK and the US
3. Labour market activation policies: a comparison of the use of tax credits in Belgium, the UK and the US Gerlinde Verbist, Lieve De Lathouwer and Annelies Roggeman 1 INTRODUCTION1 The introduction of ‘making work pay’ policies, directly subsidizing the net income from work, has resulted in a certain convergence between the continental European welfare states and the Anglo-Saxon liberal welfare states. In the Anglo-Saxon countries, where labour markets are highly deregulated, low-wage jobs are common. Instead of improving the incomes of low wage earners through minimum wages, wage subsidies for families on a low earned income has been the main strategy. For example in Canada, ‘back to work bonuses’ such as the Canadian Self-Suﬃciency Project (SSP), target an earnings supplement for working single parents who have been on welfare. Tax credits such as the Working Tax Credit (WTC) in the United Kingdom (UK) and the Earned Income Tax Credit (EITC) in the United States (US) have developed into the principal tools for social policy in these countries (OECD, 2000). These policies have been considered as a great success in these countries, as they have contributed to an increase in employment and a reduction of poverty (see Meyer and Rosenbaum, 1999; Blank et al, 1999; Duncan and MacCrea, 1999; Brewer et al, 2001). Given their success, countries in continental Europe are beginning to see these measures as the solution for the trade-oﬀ between work and poverty. Arrangements whereby the net wages of low-paid workers are nevertheless subsidized are ‘alien’...
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